Moody's Investors Service has warned that a sustained disruption in energy deliveries could expand India’s trade deficit and complicate the fiscal outlook for the country, which is currently the fastest-growing major economy.
Brent crude prices have climbed 31% since the U.S.-Israeli war on Iran began on February 28 and have fluctuated with ongoing developments. Periods of eased tensions and prospects of peace have supported recoveries in global equity markets, but Moody's said the underlying risk remains.
As the world's third-largest crude importer, India is particularly exposed to higher oil prices, which raise the import bill, feed into inflation and squeeze corporate profit margins. The rating agency recorded that foreign investors have sold Indian equities totaling $18.6 billion so far in 2026, with March alone registering a record $12.7 billion of net outflows.
Moody's reiterated its sovereign rating of "Baa3" on India with a "stable" outlook, while reducing its forecast for India's real gross domestic product growth to 6% for fiscal 2027 from an earlier projection of 6.8%, explicitly accounting for the effects of the Iran conflict.
The agency emphasized that "given lingering risks and because some production operations in the Middle East and logistical assets will take time to restart and reposition, risk premia and key commodity prices will likely remain structurally higher for some time."
Moody's said a prolonged energy shock would present more substantial difficulties, noting it could "entrench inflation, strain fiscal and monetary policy flexibility and test external investor confidence." The assessment highlights the potential for persistent price pressure to reduce policy room to maneuver.
At the company level, the impact of elevated crude will be uneven. The report identifies oil marketing companies - particularly state-owned OMCs - and fuel-dependent industries such as cement and chemicals as most likely to shoulder the brunt of the price shock.
Inland transportation cost increases have so far been limited through the use of fuel subsidies that are being borne by state-owned OMCs. Moody's cautioned that this has shifted costs onto OMC balance sheets "in a manner we view as unsustainable."
Overall, the agency's outlook ties higher commodity prices to external investor behavior, corporate margin pressures in fuel-intensive sectors, and reduced fiscal and monetary flexibility if disruptions persist.